|Prescription drugs account for as much as 30% of an employer’s health plan costs and 50% of today’s cost inflation. In ten years, prescription drugs will account for as much as 40% of health plan costs. One of the most important decisions in a pharmacy benefits cost-containment strategy is choosing the right TPA. An exceptional TPA is one that provides:
- Actual Acquisition Cost + Admin Fee for retail and mail-order drugs (lowest cost pricing arrangement)s)
- One that has an effective DUR and disease management program
A recent statistical analysis showed that with an organization of 1,100 employees, a $173,000 immediate hard dollar savings annually by choosing a TPA which offers Cost + over another that doesn’t. In other words, pricing arrangements matter!
Most TPAs do not pass on the strong discounts for prescription drugs or do not have access to it. A quality TPA should be offering all prescription drugs at AAC + admin fee. Furthermore, prescription drug ingredient costs are readily available and there is no reason for a TPA to not disclose it. No dispensing fees should be charged on mail order, and reasonable dispensing fees at the pharmacy.
There is a very simple statistical formula that can be provided that will show the hard dollar savings between two different TPAs based on their prescription drug discounts. An employer can actually determine prior to making a choice what they will pay in total annually for their prescription drug plan, based upon the TPA’s Rx discounts, dispensing fees, rebates, and administrative fees.
It is very important to find a TPA that excels in drug utilization review and management. Every employer wants a TPA who “manages” the prescription drug program. They do not just want a TPA to process claims. DUR or drug utilization review is monitoring of prescription drugs used by a patient to identify one or a combination of the following: medical errors, potential drug interactions, unnecessary or duplicate drugs and cost-effective alternatives.
A good TPA’s pharmaceutical benefit management arm will automatically generate letters to prescribing doctors, who have prescribed expensive drugs, to let them know of alternatives that cost both the employer and employee less.
Any quality TPA has a laboratory program in effect. Lab programs are free and can save an employer up to 80% on all lab costs. Since lab costs are on average 6% of the cost of health insurance, this can result in significant savings. The lab program costs employers nothing. There is no reason why a lab program should not be implemented. Why would an employer want to pay $36 for a blood test, when they can pay less than $6.00. The price differential is significant. The significance lies in the employer paying full price or a substantially negotiated deep discount.
TPAs should automatically lock in negotiated discounted rates in the form of a set price for transplants or other large out of network claims. This can happen in the form of
access to national networks for specific catastrophic diseases.
Out of network claims and large claims are repriced at no cost to the employer:
- requires no employer or employee cost in accessing the networks
- requires no contract or plan document addenda
- offers voluntary use of the networks â€“ network use is not mandated
- provides patients with access to nationally recognized specialists,
- has improved medical outcomes, and
- can produce bottom line hard dollar savings to the employer
Does the TPA offer a disease management program?
Disease Management & Health Outcomes is a special management program promotes the continuing development of disease management and health outcomes assessment. It educates the members on health issues and disease management, and attempts to guide employees to a healthier lifestyle and provides medical advice and alternatives. Disease management is important in keeping a healthy workforce
Does the TPA have an Rx formulary?
One of the most important savings or costs comes form the Prescription Drug Formulary. Many TPAs will have an open formulary meaning any drug can be purchased. This causes increased claims and costs to the employer for drugs that in reality should not be covered. For example many drugs are recommended to be excluded: such as cosmetic drugs that are for appearance only and the prescribing of them have no behavioral change on the member.
Do they have pre-certification of surgery?
A new concept to reduce the cost of a self funded health plan is to require pre-certification of not only hospital admissions, but also out-patient surgery. Currently, almost 90% of Surgeries are performed on an outpatient basis, and surgeries can easily cost $10,000 to $20,000 or more. Requiring pre-certification will result in only medically necessary surgeries being performed. Without pre-certification of surgery, there is no gatekeeper for surgeries that are cosmetic or unnecessary, and those cost the employer.
Guidance in plan document creation & excluded benefits?
One question many employers should ask themselves when going self funded is what benefits do I really need. Allowing benefits that have no proven behavioral change, does nothing but pay for a benefit, which will continue to result in more claims as benefits are used again in the future.
An example of this is obesity procedures more commonly referred to as liposuction, which have become extremely popular today. Almost every employer has an employee or multiple employees who would like to get have this surgical procedure done of the fact that they are not making any behavioral changes, such as eating habits, going to a gym, etc. These procedures can cost $10,000 and if a complication occurs during the surgery, the cost could result in an additional $50,000 or more. An employer should be given the option and guidance what benefits they can include or exclude.
Tyrone D. Squires, MBA, CPBS
FiduciaryRx, LLC DBA TransparentRx
2850 W. Horizon Ridge Pkwy., Suite 200
Henderson, Nevada 89052
Mobile: +1 (702) 803-4154
Office: +1 (775) 432-6262